Pueblo, Colo., considers forming a public power utility

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Pueblo, Colorado, has started to explore breaking away from Black Hills Energy to form a public power utility.

Pueblo’s city council on Sept. 25 unanimously approved a resolution to terminate its franchise with Black Hills in 2020 and form a public power utility, depending on the outcome of a planned due diligence study. The resolution notifies Black Hills Energy of the city’s plans. Black Hills Energy is part of investor-owned Black Hills Corp.

Pueblo, with a population of about 110,000, approved its 20-year franchise with Black Hills in 2010. Colorado law allows Pueblo to buy or condemn Black Hills’ electric facilities in the city ten and 15 years after the franchise agreement’s effective date, according to a memo on the resolution prepared by the city.

The financial implications of leaving Black Hills are currently unknown, according to the memo.

“Legal, financial and operational feasibility studies must be conducted to determine if the city can successfully provide electric utility service beginning on August 11, 2020,” the memo said.

The resolution authorizes city staff to hire consultants and begin exploring several issues surrounding forming a public power utility, including figuring out how much the effort would cost and how to finance the endeavor.

Black Hills’ electric rates are among the highest in Colorado and are threatening the economic and social well-being of Pueblo’s citizens and businesses, according to the resolution.

The Colorado Public Utilities Commission estimates that Black Hills’ residential customers pay about $105 a month on average and small commercial customers pay about $397 a month while Public Service Co. of Colorado’s residential and small commercial customers pay $74 and $125 a month on average, respectively, according to a June 2016 report to the Colorado Legislature. PSCo is a unit of Xcel Energy.

Black Hills Energy has 94,200 electric customers in and around Pueblo and about 138,300 in South Dakota and Wyoming.

Black Hills has a summer peak demand of 412 megawatts in Colorado, according to Black Hills Corp.’s most recent annual report. The utility owns 220 MW of natural gas-fired generation, 75 MW of wind and 30 MW of oil-fired resources, nearly all in Pueblo, to serve its Colorado customers.

Last year, the Colorado generating facilities produced 234,119 megawatt hours and the utility bought 1.9 million MWh to serve its Colorado customers.

Black Hills also owns 590 miles of transmission lines and almost 3,100 miles of distribution lines in Colorado.

Black Hills had $245 million in revenue from its electric business in Colorado, according to the annual report.

Boulder, Colorado, has been exploring forming a public power utility since 2010 when its franchise with PSCo ended.

The Colorado PUC recently gave a go-ahead to the city of Boulder to acquire assets belonging to Xcel Energy within the city limits, except for substations.

The city will have to negotiate with Xcel if it wants to buy the investor-owned utility’s substations, the PUC said in its lengthy decision, issued on Sept. 14.

Boulder residents will vote on a tax measure in November that would fund the municipalization effort, with a final decision on whether to form a public power utility expected in the third quarter of 2019. The city of about 108,000 estimates that it could cost roughly $300 million to form a public power utility.